FTC Accuses Rambus Of Unlawful Monopoly

by Glen Shapiro, LawAndTax-News.com, New York

04 August 2006

The Federal Trade Commission determined this week by a unanimous vote that computer technology developer Rambus, Inc. unlawfully monopolized the markets for four computer memory technologies that have been incorporated into industry standards for dynamic random access memory chips (DRAM).

DRAMs are widely used in personal computers, servers, printers, and cameras.

In an opinion by Commissioner Pamela Jones Harbour, the Commission found that, through a course of deceptive conduct, Rambus was able to distort a critical standard-setting process and engage in an anticompetitive “hold up” of the computer memory industry.

The Commission held that Rambus’s acts of deception constituted exclusionary conduct under Section 2 of the Sherman Act and contributed significantly to Rambus’s acquisition of monopoly power in the four relevant markets.

The Commission ordered additional briefings to determine the appropriate remedy for “the substantial competitive harm that Rambus’s course of deceptive conduct has inflicted.”

The Commission’s unanimous opinion stated that:

“We find that Rambus’s course of conduct constituted deception under Section 5 of the FTC Act. Rambus’s conduct was calculated to mislead JEDEC (Joint Electron Device Engineering Council) members by fostering the belief that Rambus neither had, nor was seeking, relevant patents that would be enforced against JEDEC-compliant products. . . . Under the circumstances, JEDEC members acted reasonably when they relied on Rambus’s actions and omissions and adopted the SDRAM and DDR SDRAM standards.”

“Rambus withheld information that would have been highly material to the standard-setting process within JEDEC,” the opinion continued. “JEDEC expressly sought information about patents to enable its members to make informed decisions about which technologies to adopt, and JEDEC members viewed early knowledge of potential patent consequences as vital for avoiding patent hold-up. Rambus understood that knowledge of its evolving patent position would be material to JEDEC’s choices, and avoided disclosure for that very reason.”

“Through its successful strategy, Rambus was able to conceal its patents and patent applications until after the standards were adopted and the market was locked in. Only then did Rambus reveal its patents – through patent infringement lawsuits against JEDEC members who practiced the standard.”

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